— A physician working in a large healthcare cooperative and three economists discuss healthcare cooperatives with MedPage Today.

WASHINGTON -- In the beginning, the Democrats said, a public health insurance plan was the crux of healthcare reform.

Then it was definitely not the most important part.

Then the public plan lost ground to state-by-state healthcare cooperatives, owned by patients, that could expand coverage without getting anyone blamed for a government takeover.

An now the pendulum might be swinging back to the side of the public plan, according to one leading expert on the issue.

Jacob Hacker, PhD, an economist at Yale, told MedPage Today that he expects Democrats to retreat from the idea of healthcare cooperatives.

He argued that the White House offered the co-ops as an olive branch to conservative Democrats and Republicans. If they'd support the co-op idea, maybe they'd vote for the overall reform bill. But no one to the right-of-center, with the exception of Sen. Olympia Snowe (R-Maine), offered explicit support for the idea.

"There's a sense that it's not worth compromising their plan if they're not going to gain any support for it," Hacker said.

So, he thinks Democrats will ultimately go back to Plan A -- the public plan. Which, by the way, was Hacker's brainchild during the Democratic primaries.

Still, the administration's footwork has people talking about co-ops. Exactly how they would operate is still anyone's guess, as the Senate Finance Committee, which is expected to endorse the idea, has yet to introduce a bill.

For example, a co-op might operate as a patient-governed HMO, with a salaried staff. Or it could be a less centralized organization that contracts with private practices to provide care for its members. Or it might be a buying cooperative that seeks the best rates and policies from private insurers. Or any combination of these.

MedPage Today spoke with several of experts in co-ops -- including Hacker, two other economists, and a doctor who works in the nation's largest healthcare cooperative -- to get a better idea of how co-ops work.

Wellesley Chapman, MD, a primary care doctor, works in the largest and oldest healthcare co-operative in the country. It was created in the 1940s, when the Farm Security Administration encouraged rural communities to create co-ops to provide healthcare to their citizens.

Group Health is the only survivor of those early co-ops, Hacker said. It's a nonprofit HMO with a staff model and has half a million patient-members in Washington and Idaho.

Group Health operates according to several principles often held in high esteem in the healthcare reform debate.

First, it is a "medical home" model and operated that way long before the term came into vogue. That means that every patient is linked to a primary care doctor. Currently, each primary care doctor has about 2,000 patients, but the organization has been hiring more physicians in hopes of shrinking that load to a more manageable 1,800, Chapman said.

Physicians working in Group Health's 26 medical centers are about evenly split between general practitioners and specialists. If Chapman, who works out of theBurien (Wash.) Medical Center, needs to ask a specialist a question about a patient, he said he receives a response within 12 hours.

Because of that close interaction, he said he's learned more about specialized medicine in the year he's been working for Group Health than he ever learned in his residency.

Second, Group Health relies heavily on electronic medical records, e-mail, and phone consultations, which many in Congress tout as the wave of the future.

In most medical systems, doctors aren't getting reimbursed for a phone call or e-mail, so they generally bring patients into the office for minor visits. Because physicians at Group Health receive a salary, rather than fee-for-service reimbursement, there are no incentives for unnecessary face-to-face consultation.

Chapman said he generally sends 200 to 300 e-mails per month and has two to four scheduled phone conversations with patients per day.

"There is no pressure to work on productivity," said Chapman. "If I see five patients in a day, I get paid the same as if I saw 20. It really takes the pressure off to bring patients in when I could deal with it on the phone or e-mail. It's really liberating."

Primary care physician salaries in the Group Health system are on par with national averages, Chapman said, which means they are paid less than specialists. But there's no shortage of primary care docs willing to work for Group Health: Chapman says that for every open primary care position, there are 12 applicants.

Finally, of course, Group Health is a cooperative, which means it is controlled by patients. They elect a board of trustees each year, and the board chooses the president and the CEO. While the state co-op plan discussed in Congress wouldn't necessarily be an HMO, it would likely adhere to similar business principles -- such as being patient-owned and governed.

On a typical day, Chapman says he gets to the office at 8 a.m. for a meeting with members of his team -- which include several physicians, a licensed nurse practitioner, a registered nurse, a physician assistant, and a member of the "flow staff" -- to discuss what the day will be like.

Often, this involves deciding which services a particular patient should receive during his or her visit. For example, if a woman is in the hospital for a broken wrist, should she get her annual pap smear in the same visit?

Chapman will see about eight patients in the morning, make a scheduled phone call to a patient, take lunch, see eight more patients, make another call, and be done around 6:00.

He doesn't spend time on paperwork, and the co-op doesn't have a billing staff that haggles with insurance companies over reimbursement issues.

"Those things take up a tremendous amount of doctor energy," Chapman said. "The amount of time they spend thinking about that, they could be doing patient care. Or learning to be better doctors."

Of course, no workplace is perfect. Chapman said co-ops tend to tightly control costs. Group Health favors generic medications over brand names, and if Chapman wants to stray from a generic, it can take some arm-twisting.

Jacob Hacker, PhD, political science professor, Yale University

While Group Health of Washington is a respected co-op, it is "not probably a very likely model for a national network that would really challenge existing private plans," Hacker said.

A new public, government-run plan would likely cover about 10 to 12 million people, according to an estimate from the Congressional Budget Office. Backers see that leverage working to make the public plan a competitor for large, private insurance companies. But state-by-state cooperatives could never attract the number of members needed to compete with large private plans, Hacker said.

Even Group Health is about 29.5 million members short of reaching the number of patients enrolled in the nation's largest insurance plan, WellPoint.

"The cooperatives are simply just not going to be able to do what the public plan could do," Hacker said.

Co-ops won't have enough patients to set standards that private insurance companies might follow, or to have the clout to negotiate prices with providers.

Most metropolitan areas, 94% of them, are dominated by one or two large insurance companies, and co-ops won't change that, Hacker said.

"They do not have the reach to fundamentally change the market in the areas they operate," he said.

When co-ops were last seriously discussed in Washington in the 1990s, the idea had a liberal label, with some even invoking the dreaded "S" word: Socialism, Hacker said.

"Doctors were very opposed to it, thinking it would be an infringement on their ability to privately practice and to bill patients directly," he recalled.

Now, co-ops are being sold as a moderate or conservative idea.

Hacker said that if they operated as HMOs, like Group Health, co-ops offer some appealing features. Patients probably would like having such a stake in their healthcare, and co-ops can use innovative delivery models to hold down the cost of care. But they are not an alternative to the public plan, he said.

Gerard Anderson, PhD, director, Hospital Finance and Management, Bloomberg School of Public Health, Johns Hopkins University

Gerard Anderson isn't much more optimistic than Hacker about the potential of the co-op model.

He said that in the past, successful cooperatives have had to start behaving like for-profit companies in order to be competitive.

He noted that the Robert Wood Johnson Foundation attempted to establish co-op-like plans in the 1990s, but nearly all failed because they couldn't attract enough patients.

If cooperatives pay doctors what private insurance companies pay, they may have a chance of attracting physicians, but without the large patient base, co-ops likely won't have the power to negotiate prices.

In order to succeed, he said, the co-ops would have to figure out a way to differentiate themselves from private insurance plans.

"They have to have something that is unique," Anderson said. "Figure out what their market niche is. They clearly have to be seen as something substantially different than Blue Cross or Wellpoint. But if I were to guess, they're going to look very similar to what private insurance is."

Ann Hoyt, PhD, economics professor, University of Wisconsin Madison

Anne Hoyt is more optimistic about the role of co-ops in healthcare reform. Hoyt, who authored a study of nearly 30,000 cooperatives, including farm, electric, and credit union co-ops, said healthcare can certainly be provided successfully in a co-op model.

But in order to work, a healthcare co-op would need to start with a strong business foundation, just like any successful new business. Its governors would need to understand the industry, to identify and recruit new members, and have a strong grasp of state insurance laws, she said.

But if past experience is a clue, a successful co-op takes time. Lots of time, especially if one takes into account the 62 year history of Group Health.

"It's impossible to tell how much time," Hoyt said. "It may be that people will be anxious to join a co-op and they won't need to recruit."

Hoyt said other economists have pegged the number of members necessary for an effective co-op at about 25,000 people, or at least five million people to be a real competitor with private insurance companies.

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